Thursday, January 01, 2009

China, the world's largest grain grower, may issue fewer corn export licenses in 2009 than expected and won't provide trade incentives as it seeks to control prices and ensure domestic supply, according to two traders who declined to be identified.

The government may also decide to delay issuing the licenses, they said. Chinese corn prices have risen from a two-year low after the government said it would increase buying of domestic corn to boost farm incomes, Bloomberg News said.

China earlier this month was said to be considering as much as 5 million metric tons in corn export quotas after high output and controls on overseas sales created a domestic glut. Tightening of China's shipments will help grain suppliers in the United States keep their share of the Asian market.

"Prices have strengthened, and that's prompted the government to shift back to its priority, which is ensuring sufficient domestic supply," said Cao Yanhui, of Liaoning Cifco Futures Co in Dalian.

May-delivery corn on the Dalian Commodity Exchange ended 0.2 percent higher at 1,527 yuan (US$224) a metric ton. The most active contract is up 6 percent since touching a two-year low of 1,440 yuan on December 12. Corn prices on the Chicago Board of Trade have fallen 50 percent from a June record as slowing global growth trimmed demand for raw materials.

The government this week ordered reserves to boost buying corn from farmers by 20 million tons to a total of 30 million tons, the China National Grain and Oils Information Center said.

China sells corn mainly to South Korea and Japan.

Exports in the first 11 months this year plunged 95 percent to 235,379 tons after the government in January levied taxes and stopped issuing new export permits.